What It Means
XIRR (Extended Internal Rate of Return) is a method of calculating annualized returns for investments where money goes in or out at irregular, uneven dates — like a SIP, where you invest a fixed amount every month rather than a single lump sum.
How It Works
A simple return calculation (final value minus invested amount, divided by invested amount) doesn't account for when each rupee was invested — a ₹1,000 SIP installment made 5 years ago should count differently than one made last month, since it's had far longer to grow. XIRR solves this by treating every individual cash flow at its actual date and computing the single annualized rate that makes all of them consistent with the final value. This is exactly why a mutual fund SIP's XIRR and its "absolute return" figure can look meaningfully different — XIRR is the one that actually reflects your annualized return given when each investment happened.